Peloton Stock Soars 195% From 52-Week Low: Is It Too Late to Invest?

Peloton Interactive has seen a remarkable recovery, as its stock has surged 195% from its 52-week low. This rise comes as the company prepares for a leadership change, with its new CEO, Peter Stern, bringing valuable experience from his previous seven years at Apple.

During the pandemic, Peloton became a beacon for fitness lovers as demand for its connected equipment and online classes skyrocketed. However, as social conditions normalized post-pandemic, the company faced challenges, leading to revenue declines in its last three fiscal years. These difficulties forced Peloton to make substantial adjustments, including laying off half its workforce, moving manufacturing overseas, and cutting costs across the board.

While Peloton's stock is down 95% compared to its peak, the recent comeback reflects the company's efforts to stem losses and stabilize revenue. As of January 1, Stern aims to build on this momentum by implementing strategies learned at Apple.

Challenges and Improvements

Peloton faced a tough nine quarters of revenue decline until it showed a slight increase of 0.2% in its final quarter of fiscal 2024. However, the most recent fiscal report for the first quarter of 2025 showed total revenue of $586 million, representing a 1.6% drop from the previous year. In particular, equipment sales were down 11.6%, while subscription revenue saw a modest rise of 2.7%.

The focus on subscription revenue is critical for Peloton as it forms a steady income source with higher profit margins. In the recent quarter, subscription revenue generated a 67.8% gross profit margin compared to only 9.1% for equipment sales. Peloton's two primary subscription products include connected fitness, aimed at equipment owners, and Peloton app subscriptions, for users who prefer digital access.

Efforts to improve the bottom line led to a significant reduction in net loss, now under $1 million, compared to a staggering loss of $159.3 million a year earlier. Yet, Peloton’s total connected fitness members decreased by 2.7%, losing about 81,000 members, while the app experienced a 5.4% churn rate.

Future Outlook

Looking ahead, Peloton's projections for the fiscal year indicate that the recent losses are not just short-term hiccups. The company expects its connected fitness subscribers to fall to 2.71 million, a 9% decline, alongside a projected 7% decrease in Peloton app users. This decline is anticipated to gauge a total revenue drop of 9%, forecasting $2.45 billion—marking the fourth consecutive annual revenue decrease.

On the upside, Peloton forecasts adjusted EBITDA of around $265 million, a staggering 7,398% increase from the previous year's figure. This suggests that the cost-cutting measures in recent times are key to positioning the company for future profitability despite falling revenues.

With $949 million in long-term debt and only $722 million in cash, Peloton faces financial pressures. The need to avoid further capital dilution prompts management's strategy to scale back on growth-oriented expenditures like marketing, which is likely to impact long-term revenue growth potential.

Investors are left wondering if it's the right time to invest in Peloton. Despite a leadership change on the horizon with Stern's appointment, whose background in subscription services may lend unique insights, there is no quick fix to the challenges facing the company. Following years of decline, it could take a significant period before Peloton finds sustainable growth.

In conclusion, buying Peloton stock could still make sense for those believing in a long-term turnaround, but it's essential to be prepared for potential volatility and uncertainty over the next few years.

Peloton, Stock, CEO